Goldman, Warburg eye $200 million stake in WeWork India

The Indian arm of co-working space giant WeWork, controlled by billionaire developer Jitu Virwani of Embassy Group, is talking to Goldman Sachs and Warburg Pincus, among others, to raise up to $200 million. With this, the local unit’s valuation is testing $1 billion, or the Unicorn tag, people directly aware of the matter said.

Virwani and Embassy have the exclusive rights to operate WeWork in India under a deal signed about two years ago. Since then, the collaborative workspace pioneer has made rapid strides in the country where it operates 12,000 desks currently, with plans to more than double it by the end of the year. India is the only big market where the New York-headquartered WeWork — last valued at $20 billion globally — has struck an exclusive franchise deal to run its operations.

The embassy has mandated JM Financial on the potential fund-raising at an enterprise valuation in the range of $700 million to $1 billion for WeWork India, sources cited earlier said. GIC of Singapore is another contender that has shown interest in the deal-making, which is still in the early stages. The valuation would be range-bound, depending on how the local unit scales up the business in the course of the year. The figure could be around $1 billion if the business remains on track and the target of doubling desks in the year is achieved.

The latest development comes at a time when WeWork, which raised more than $4 billion from SoftBank, has been eyeing to raise its economic interest in the Indian business. It has an option to buy back the business in the fifth year of operations, but there has been swirling speculation about WeWork and SoftBank looking to take charge of the Indian business much earlier.

Embassy and JM Financial declined to comment. An emailed query to WeWork remained unanswered at the time of going to press.

The demand for co-working and flexible workspaces has soared in India with international property consultancy firm JLL estimating that more than 13 million would be using it by the year 2020. Interestingly, big enterprises are driving the co-working space absorption with corporations like IBM and HSBC showing interest to take up collaborative floors. The rise of millennials and the large, vibrant startup ecosystem are the other key factors boosting co-working.

In India, the demand for flexible working spaces is expected to increase 40% and the stock supply is seen rising 35% in the current calendar year, a JLL report said, adding that it would account for nearly 20% of the total office absorption in the country. Tracking the boom, the number of flexible workspace providers have also risen significantly, though WeWork and its main Indian rival CoWorks remain the top players. WeWork operates nearly 1-million-sqft space at present and has a million sqft more signed up already.

Adam Neumann and Miguel McKelvey co-founded WeWork eight years ago, one of the heavily funded tech-enabled startups, managing more than 10 million sqft of shared office spaces worldwide. Virwani controls the privately held Embassy Group, one of the largest conventional office space developers in the country, while his son elder Karan Virwani leads WeWork operations locally.

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